The gold rebound path is clear!

This week, gold fluctuated within a narrow range, with a weekly fluctuation of only $26. This kind of performance has been relatively rare in the past two years. The market is waiting for further clarification of the news.

The relationship between the Fed's attitude and gold is simply reopened

A brief review of the relationship between the Fed's attitude and gold since June this year. It is roughly divided into three sections:

(1) In mid-June, gold began to fall sharply from US$1,900. The corresponding event was the release of the hawkish attitude at the Federal Reserve meeting in mid-June.

(2) Later, both Fed Chairman Powell and Vice Chairman Williams said that there was no schedule for QE reduction, which led to a rebound in gold prices.

(3) At the beginning of August, Fed Vice Chairman Clarida expressed support for QE reduction in the second half of the year, superimposing good non-agricultural employment data, leading to a fall in gold prices.

Obviously, as long as the Fed expresses its position to reduce QE, gold will fall. On the contrary, gold rebounds.

The key event next week is Powell's speech at the Jackson Hole Central Bank Annual Meeting.

The annual seminar held by the Federal Reserve Bank of Kansas has lasted for nearly forty years. Because of the attendance of central bank leaders of many countries, it has attracted great attention from the global financial circle.

Historically, at the annual meeting of the Jackson Hole Central Bank, the chairman of the Fed often released the important direction of the Fed's monetary policy. For example, at the meeting last year, Powell put forward the concept of an average inflation target.

This year, the chairman of the Federal Reserve will broadcast a live broadcast to the public on the Kansas Fed’s YouTube channel at 10 a.m. Eastern Time on August 27th.

The theme of this conference is "Macroeconomic Policy in an Unbalanced Economy". The market looks forward to hearing the latest attitude of the Fed on QE reduction in Powell's speech.

If Powell made it clear at this meeting that the Fed will reduce QE, whether it is October or December, it will begin to reduce QE, which will put pressure on gold.

Conversely, if Powell was vague about reducing the Fed's QE time reduction at the Jackson Hole Central Bank meeting, it would be a short-term benefit to gold. Why is it a short-term benefit? Because even if it is not explicitly stated this time, the probability of being stated at the Fed meeting in September is still relatively high.

Someone asked, what if not only did Powell no longer express it at this meeting, but at the Fed meeting in September, he did not expressly reduce the QE time?

If this is the case, gold is expected to rebound further. At present, this possibility is relatively small.

Personally, I am more inclined. At the Jackson Hole Central Bank meeting next week, Powell will make a clearer statement on reducing QE time. The more likely statement is,

-"Support the Fed to implement QE reduction in the fourth quarter."

-"With employment recovery, support the Fed to implement QE reduction in the fourth quarter."

It is clear that the QE will be reduced in the fourth quarter, but it also provides some flexibility for the specific timing of the QE reduction.

Whether this is the case, I have to wait until after the meeting to see it.

Some friends also asked whether the current market expectation of the Fed to reduce QE has been digested by the market.

The Fed has been talking about reducing QE for a long time. Has the market digested this news?

At present, the real interest rate of 10-year Treasury bonds in the U.S. Treasury is -1.01%, which is at the lowest position in history, as shown in the figure. If the market digests the Fed’s expectations of reducing QE, real interest rates should have a clear upward process. Therefore, the market is still in an expected state for the Fed to reduce QE.

Waiting for the Fed to expressly reduce the time for QE, by the time when the Fed implements QE for the first time, the impact on the market should be the greatest.

This is true for gold and silver, and it will have a greater impact on commodities and the stock market.

At the same time, since the Fed's QE reduction has been repeatedly mentioned, the impact on the market is unlikely to be as great as it was in 2013.

Judging the trend next week

From the analysis of technical trends, there is a high probability that gold will have an upward rebound process, but there may not be much room for rebound. The pressure above focuses on the $1,800 area. If it breaks through US$1,800, the subsequent rebound position may be US$1,830, but this possibility is currently small. Unless Powell is quite dovish at the meeting next Friday.

Technically at the beginning of the week, spot gold at $1,770 constituted a relatively important support. If Monday is still consolidating at $1770-1785, then Tuesday will choose the short-term direction, or break down to $1770, or test the $1795-1800 upwards. Personally, I prefer to still have a process of testing $1,800 at one time.

Therefore, in short-term operations at the beginning of the week, if it stabilizes at $1770 at the beginning of the week, gold is expected to rise.

Steady investors pay attention to short-selling opportunities after the daily level has risen and fallen.